Executives' Comments  Press Conferences   Chairman Sakakibara's Statements and Comments
at His Press Conference

June 2, 2016

Challenges for My Third Year as Chairman of Keidanren

Today, I am starting my third year as Chairman of Keidanren. Keidanren has the following three primary roles: 1) show the direction the business community as a whole should take and spearhead corporate actions to achieve economic growth led by the private sector; 2) lead structural reforms spanning all aspects of Japan's economy and society; and 3) make policy recommendations to the government from the perspective of the business community, taking into account the national interest and the future, and conduct outreach for their realization.

In my third year, my priority is to ensure that Japan exits deflation and revitalize its economy, coupled with securing a firm path to achieving an economy with GDP of 600 trillion yen. This requires, first and foremost, expanding demand, which includes stimulating consumption and encouraging investment. It will be particularly important to stimulate personal consumption that accounts for approximately 60% of GDP. Personal consumption has remained flat ever since the consumption tax increase in April 2014. The government needs to take measures to prop up consumption and create demand to shift over to an increasing trend in personal consumption and assure the recovery of consumption. Keidanren will request the government to swiftly implement bold measures to stimulate consumption accompanied by large-scale public spending.

Keidanren will cooperate with the government to drive forward the "Public-Private Strategic Project 10" that was included in the Japan Revitalization Strategy 2016, which reflects Keidanren's proposals. As a driving force for strengthening the growth strategy, this project must be carried forward by mobilizing the wisdom of the public and private sectors and resources. In particular, it will be critical to realize "Society 5.0" through the fourth industrial revolution.

In addition, Keidanren will be proactively engaged in the swift entry into force of the TPP Agreement and promoting economic partnerships, including the swift realization of the Japan-EU EPA and Japan-China-South Korea FTA, as well as strengthening and expanding economic exchanges with other countries and encouraging women's active participation.

Furthermore, Keidanren itself will address self-improvement and reform. I remain committed to earning further trust from society and fully living up to the expectations of the people.

Re-postponement of the Consumption Tax Increase

Prime Minister Abe made a critically important political decision to re-postpone the consumption tax increase. As I see it, Japan as the G7 Chair took the lead in implementing the agreement reached in the G7 Ise-Shima Leaders' Declaration. My understanding is that the decision demonstrated Prime Minister Abe's unwavering strong determination to stimulate lackluster personal consumption, not allow the Japanese economy to fall back into deflation, and give top priority to revitalizing the economy. Keidanren respects the Prime Minister's decision.

The government needs to set its eye on achieving both GDP of 600 trillion yen and fiscal soundness. To this end, Keidanren will request the government to swiftly establish and carry out economic measures including large-scale public spending.

Fiscal Consolidation

Although some concerns are being raised that the postponement of the consumption tax increase will make fiscal consolidation a more distant goal, Prime Minister Abe has vowed that the government still holds up the banner of achieving a primary balance surplus by 2020. Its realization requires the concerted efforts of the public and private sectors. To achieve fiscal consolidation, it is necessary to make efforts on the three fronts of the economic growth strategy, expenditure overhaul, and revenue reform. The postponement of the consumption tax increase will lead to a tight revenue situation. However, the postponement provides a good effect on economic growth. Considering everything together, my outlook is that we will be able to achieve the fiscal consolidation goal. The postponement of the consumption tax increase has given us a 30-month leeway, and in that time, we need to restore consumption. An economic environment must be created to ensure that the consumption tax increase is realized in October 2019. We must not postpone for the third time. The business community is committed to establishing a path towards achieving an economy with GDP of 600 trillion yen.

Likewise, expenditure overhaul is another major component of fiscal consolidation. For a long time, the government has taken a hands-off approach to social security system reform, in particular, to improving the efficiency and streamlining social security benefits. However, the government needs to take bold measures without allowing any exceptions. One of the expert committees of the government's Council on Economic and Fiscal Policy, the Social Security Working Group that I chair, has identified 44 specific reforms and compiled an action program. Along with improving the efficiency of and streamlining overall social security benefits, the focus of assistance must be shifted from elderly households to child-rearing households.

Economic Situation

At the G7 Ise-Shima Summit, leaders expressed the opinion that there are shadows over the economic growth of emerging economies, that developed countries are not seeing a robust recovery of their economies, and that the world economy is facing downside risks. The B7, the summit of business leaders of G7 nations, expressed the view that the world economy is far from reassuring, taking into consideration growing concerns over issues such as a downturn in emerging economies and a steep decline in crude oil prices. Thus, the G7 and the B7 share the same understanding regarding the economy.

That said, at this time there are no grounds for pessimism regarding the economic situation. It is different from that of the global financial crisis of 2008. The G7 leaders expressed the view that while there are regional differences, the world economy will sustain its moderate recovery. The leaders acknowledged the existence of downside risks, and, at the same time, committed to mobilizing all policies—monetary policy, fiscal policy, and structural reforms—to prevent the world economy from falling into a new crisis. According to the IMF's economic forecasts, a growth of 3.2% in 2016 and a growth of 3.5% in 2017 are expected. The economic fundamentals are nothing of the sort we saw at the time of the 2008 global financial crisis.

With regard to the Japanese economy, both corporate performance and employment are steady, and the economic fundamentals are strong. The situation is not like the time of the global financial crisis of 2008. As long as economic measures to stimulate consumption are implemented steadily, the Japanese economy can achieve nominal economic growth of 3% and real economic growth of 2%. I am not pessimistic about the outlook of the Japanese economy at all.